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US pension fund sues credit rating agencies

CalPERS, the largest public pension fund in the US, is suing three credit rating agencies in the California Superior Court for allegedly awarding misleading rating to securities that have gone bad.

Standard & Poor’s, Moody’s and Fitch are named in a lawsuit aimed at recouping some of CalPERS’ billion dollar loss relating to the securities.

According to reports, the fund, which manages assets of $176.1 billion, invested $1.3 billion in bonds issued by three structured investment vehicles (SIVs) with AAA credit ratings.

All three SIVs have since collapsed and CalPERS is bringing a case based on the credit rating agencies’ conflicts of interest in assessing the SIVs.

Typically, the firms would have been involved in the structuring of the investment vehicles and have then gone on to charge large fees for rating them.

Meanwhile, the Wall Street Journal has reported that the chair of the US Securities and Exchange Commission, Mary Schapiro, has indicated her support for proposals that would make it easier for investors to sue ratings firms.